chapter 2 Flashcards
assets
econ. resources owned by a business that are expected to benefit future operations
- monetary items
- nonmonetary, physical things
- nonphysical things
liabilities
aka debts
creditors MUST be paid before stockholders
owner’s equity
the claims by the owners to the assets of the business
is the remaining equity after deducting assets - liabilities
OE = assets - liabilities
revenue
income from sale of goods made within the main operations of a business
cash sales
credit sales - sales made on open account
expenses
$ spent to produce goods + deliver service
econ. cost of a business, that come from the business operating
- utility expense
- depreciation expenses
- wages & salaries
- marketing expenses
- R&D expenses
financial statements
communicate accounting info to users
represent models of the business enterprise
- they show the business in financial terms
! financial statements are not a perfect representation of the business
income statement
summarises revenues earned and expenses incurred over A PERIOD OF TIME
- shows if business earned its profitability goal
statement of owners equity
shows the change in the owner’s capital OVER A PERIOD OF TIME
balance sheet AKA statement of financial position
shows financial position AT A POINT IN TIME
presents a view of the business as the holder of assets that are equal to the claims AGAINST those assets
cash balance
= increases in cash - decreases in cash
statement of cash flows
focuses on company’s liquidity coal
shows cash produced by operating a business
- shows important financing & investing transactions that take place during the accounting period
- is directly related to income statement, statement of owner equity, balance sheet
equity
the initial investment the owner made into the business
